The Appellant State Officers appealed in this case from a District Court injunction permanently closing the state courts to the state's efforts to enforce its Milk Stabilization Act against independent contractors selling milk to commissary grocery stores, officers' clubs, post exchanges and to troop messes.

Strictly the essentials, there are two basic issues here.

The first is the Government’s request that this Court's decision in Penn Dairies versus Milk Control Commission in 318 of United States be overruled.

That case held that the State of Pennsylvania could enforce its Milk Stabilization Act similar to California's against independent contractors selling to the United States and that it's statute as so applied was constitutional and was consistent with federal procurement policy.

The second issue in this case among many but primary, is whether the Government acquired exclusive jurisdiction over three particular installations in California without complying with the state statutory condition that the Government inform us just which processors were being taken into federal jurisdiction.

Following the entry of this injunction closing the state courts of the state, prices received by dairy farmers in California dropped sharply.

They dropped to the extent that dairy farmers were suffering losses at the rate of nearly $7 million a year based on Federal Government purchases of 29 million gallons of milk in fresh form.

Yes sir?

Unknown Speaker: [Inaudible]

Mr. John Fourt: The District Court held the complete California statutory scheme unconstitutional.

Insofar as the issues in this case are concerned, California establishes the price at which a distributor must pay the dairy farmer for milk received by him and it also fixes the price at which the distributor may sell that milk.

As construed by the California Supreme Court, the statute goes no further than the distributor and does not apply to the United States.

The three installations here involved are Castle Air Force Base, Travis Air Force Base and the Oakland Army Terminal.

The state statute was held unconstitutional on two grounds.

First, that delivery of the milk occurred to these three bases and that these three bases were subject to the power in Congress to exercise the power of exclusive legislation under Article I, Section 8, Clause 17 of the Constitution.

In a second equally pervasive ground holding the state statute unconstitutional was that the state statute imposed a prohibition on the Government and its contracting officers in their purchase of milk.

We believe that both of these constitutional issues were posed in the Government's complaints and adopted by the District Court for the Northern District of California.

There being present, two constitutional issues in the case, it was proper then that a three-judge Federal District Court be convened, a three-judge court being properly convened then this Court has direct appellate jurisdiction.

Both the Government and California agreed to this proposition.

Following the Court's reservation of the question of jurisdiction to the time of oral argument, California filed also a petition for certiorari to the Court of Appeals for the Ninth Judicial Circuit before judgment in that court, if this Court cannot reach the merits of this case by appeal, then we ask and the Government joins us in asking that this Court hear the merits by certiorari.

Turning to the merits, the purpose of the Milk Stabilization Act of California and of the 23 other states who have similar laws is to protect the state supply of a vital food by regulating the prices for milk.

The state establishes minimum prices after public hearings and often after litigation.

This public setting of prices is to be distinguished and indeed was intended to prevent collusive price setting by combinations of sellers.

We think that this then emphasis or legislative objective of the California statute in and of itself shows that there's no conflict with the congressional objectives and the federal procurement statutes which are designed to prevent private collusive setting of prices by its emphasis on pre-competition.

Minimum wholesale prices and the said fixing of it by the state was found necessary by the legislature because of internal and unique competitive problems in the industry which require that distributors be assured of a adequate return and a regular return money which would allow them to cover their own expenses and have enough left to pay the dairy farmers.

And obviously, if the dairy farmers do not receive their cost production in the long run, our supply of a vital food will be impaired.

The Government contends that the California law is unconstitutional because it imposes a direct prohibition on the Government.

Our answer is that the District Court there erred because it should have given deference to the contrary opinion by the California Supreme Court that in the Penn -- Pacific Coast Dairy case in 319 Cal.2d, later reversed on another ground by this Court that the Milk Stab -- California Milk Stabilization Act does not apply as written, not as a matter of constitutional law but as written, it does not apply to the Government nor to its procurement officers.

Justice Arthur J. Goldberg: You mean they can't be penalized, is that it?

Mr. John Fourt: Yes, that is correct.

That once the Government enters into a contract as a matter of the way our statute is written, it is free then to act as it chooses and we have no remedies under our statute against the Government.

Now, to construe our law as did the District Court then, adopts a construction of state law contrary to that made by our highest state court.

Secondly, the state officers involved in this appeal, have administratively construed and agreed with an interpretation of the California Supreme Court that our laws do not apply to the United States.

Therefore, the District Court struck down our law on a hypothetical ground, a ground that could never come up.

Thus, our statute does not impose a prohibition on the Government.

Now, another ground of attack, the Government says that if California regulates the price at which a distributor may sell to the United States, the effect is to regulate the price which the United States buys.

Now, we submitted that this is not true factually nor legally.

The United States is affected only by the terms of its contract with the distributor not by virtue of state statute.

And this element then distinguishes such cases as Kern-Limerick, where the statute, as written encompassed the United States as a purchaser in that case.

Our statute as written here does not encompass the United States.

Justice Arthur J. Goldberg: [Inaudible]

Mr. John Fourt: The economic burden in either case is passed on to the United States.

We understand that an even handed regulation of a contract with the United States which caused a burden which is passed on United States is constitutional.

This Court passed on this identical issue in the Penn Dairies case in 318 of United States.

Now, as specifically applied in our case, the United States purchases milk for a number of different uses.

It purchases milk for resale through officers' clubs, post restaurants and post exchanges.

These activities do not operate from federal moneys, but through private revolving funds.

They are federal activities since they are operated under federal regulation but there is no loss or risk of loss of United States funds, and any increase in the burden is not passed to the Federal Treasury, but to patrons of officers' clubs and post restaurants and post exchanges.

The Government in its brief makes no answer to our contention that this particular activity is constitutional, that is, that the application of our law to independent contractors selling to officers' clubs, post exchanges is constitutional and valid.

Because these particular activities do not use federal funds, their purchases do not come under the Armed Services procurement statutes and therefore there could be no statutory conflict between the state and federal regulations.

The second and major use for which the United States purchases milk is for resale through post commissaries.

At the Oakland Army Terminal which is located in the harbor in the center of the City of Oakland, 78% of the milk purchased by the United States at that base is resold by it through its commissary.

Here, the funds used are revolving funds, but are appropriated by the Congress in a continual and standing appropriation.

The commissaries are operated without cost to the Government because under the army and the federal regulation, the price is charged, must be high enough to have the commissaries operate without cost to the Government.

We think that the Congress in enacting the federal procurement statute specifically intended to accommodate state price fixing laws with respect to commissary sales because they expressly provided that the United States when purchasing for resale, need not go through the formal advertising procurement procedure, but may use non-competitive and negotiated procurement.

By negotiation, this means that contracting officers, an individual supplier and just ordered the goods.

He need not put it out for bids.

He need not contact more than one supplier.

And the reason, given in the congressional reports is that a commissary often as it has been buy by brand name to satisfy the needs of its patrons.

Any increase in cost to the commissary then by the application of our state law to contractor selling to the commissary are not borne by the Federal Treasury but are then -- go back into the purchase price of the patron of the commissary.

The Congress also has stated in the appropriation acts to the Department of Defense that commissary stores may not be established in areas served by adequate commercial facilities.

Again, we think this shows that the commissary stores were not to operate in competition, door-to-door competition with a private retail store which must comply with state law.

The Government maintains 242 major military installations in California.

These installations through their commissary stores sell 20 million gallons of fresh milk.

It is our experience that if this invidious discrimination between the prices of milk purchased by a retail grocery store and a commissary store continues that this will indeed destroy the California Milk Stabilization Act.

Another category is that the United States to a lesser extent purchases milk for use in the troop kitchens, troop issue on the three bases involved here.

The average was 30% of the total milk was used for troop issue.

Here again, we think Congress' intuitive intent that the procurement statutes are to accommodate state price fixing laws.

And then there is, the Court noted that again, procurement officers need not go through formal advertising procedures and procurement but may use non-competitive negotiated procurement because the -- this was a perishable commodity and further that the Government may use negotiated purchase where competition is impractical and one element of competition of course is eliminated when a floor is set on the price at which a contractor may sell milk to the United States.

Further, the Congress through the Department of Agriculture subsidizes the purchase of milk for troop issue over and above the eight ounce basic ration at the rate of a little over 8 cents per quart.

The reason that the Congress granted a subsidy was to ensure a national adequate quantity of milk.

Now, this subsidy on purchases by the Armed Services goes through the contractor and then goes back to the dairy farmer.

We think it's inconsistent for contracting officers utilizing their tremendous bargaining power to drive the prices down to the dairy farmer below the cost production while another agency subsidizes Armed Forces procurement of milk.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: Yes.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: Yes, that is correct.

We have two very large --

Justice Byron R. White: [Inaudible]

Mr. John Fourt: No, it's a minimum price.

Yes, yes, the cooperatives were largely organized in the 1920s and --

Justice Byron R. White: [Inaudible]

Mr. John Fourt: Yes.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: The cooperatives have maintained their position in California.

Roughly, I would say between 18% and 20% of total volume is handled through the cooperative associations and then balanced with conventional distributors and that balance by and large is not changed over the years.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: Yes.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: Yes, I'm not -- yes, in our brief, it discusses the particular conditions of instability in the 1930s particularly in 1935 which caused the California legislature to enact our Milk Stabilization Act.

These were generally a nationwide condition and which led to similar legislation being enacted by the Congress.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: No.

The problem did not arise in California until a surplus of milk developed and that surplus of milk did not become acute until after the close of the Korean War.

And at that time then, both conventional and cooperative distributors sought intense competition, Government contracts, and as the contract price for the Government lowered, the state received the objections of producers asserting they weren't being paid the minimum price.

This led to our enforcement action in the state courts.

The appearance by the United States Assistant Attorney General and assistant attorneys in those actions in the trial court and then when we were initially successful in the trial court then United States filed a -- press its actions in the United States District Court to close our state courts.

I think a second answer is that this particular problem we have thought was settled in 1943 in the Penn Dairies decision and we think that for that reason, the Government asked the Penn Dairies decision be overruled.

The United States relies heavily on California Commission versus United States in 355 of United States reports.

That case involved a non-economic burden on United States primarily excessive delays by which the United States could move all of its secret military traffic.

There, the United States had no choice in intrastate shipments, but to file suit or to subject itself to California regulation.

There was also an element of discrimination in that the kind of shipments the United States wished to make were a type called traffic all kinds which they could ship a whole train load at one rate and California has not recognized that kind of shipment.

And there, there was an invidious discrimination applied against a contractor with United States.

And we think that the Court's discussion in that case of the discretion given to procurement officers were related to this non-economic burden on the United States particularly in a vital military function.

Justice Arthur J. Goldberg: [Inaudible]

Mr. John Fourt: Yes.

Justice Arthur J. Goldberg: Provided the rules from the military base [Inaudible]

Mr. John Fourt: We think that this is a matter of degree and in the sense of the Court, I use it there within the terms California Commission, this meant a matter which is essential to the defense of a nation in the answer to the precise facts, I would say that that is not in the same category as the untold delays of military shipments going forward to eastern hostilities.

Justice Arthur J. Goldberg: In other words, [Inaudible]

Mr. John Fourt: In the sense that this is certainly within the power of commerce, that is recognized.

Again though, we would distinguish between military shipments going forward to areas of hostilities and the sale of milk particularly where the state regulation forwards an even handed burden to United States.

Justice Arthur J. Goldberg: With regard the Government, [Inaudible]

Mr. John Fourt: Yes.

Yes we would.

Turning to the other issue which involves the land jurisdiction, the Government concedes that California has not made a session of exclusive jurisdiction over these three bases to United States and by the term exclusive jurisdiction, we refer to the term derived from international law that when one government makes a session to another that the laws of the old sovereign are completely obliviated in the new area and such laws that are carried forward are carried over as associated laws for the new sovereign.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes, that is correct.

My point was that we were eliminating under the Government's theory one way which the Government could have obtained sovereignty.

Unknown Speaker: [Inaudible]

Mr. John Fourt: That's right.

California in 1897 enacted a very broad statute.

The statute covered all lands within the state now held or reserved for the Government -- by the Government of the United States for military purposes or defense or which may hereafter be ceded or conveyed to said United States.

Now, this was in 19 -- 1897 and it clearly covered then all lands purchased or acquired by the Government since 1872, 1872 being the date of the statute relied on by the Government.

It covered all lands which were owned by United States at the time that California was admitted to the Union in 1850 and the statute, 1897 statute covered all lands that United States could possibly acquire after 1897 because it covered all lands obtained by conveyance and by cession.

We take it there's only two ways United States could acquire land.

Since the 1897 statute then we submit, qualifies and controls any land previously acquired to 1897, then – the argument then as to what quantity of jurisdiction United States might have acquired under the 1872 statute is irrelevant.

Now, the United States admits that California can constitutionally condition our cession of jurisdiction and we did just that by requiring that the Government notify California just what lands will be taken into federal jurisdiction, that requirement was that land descriptions and plots be recorded in the appropriate country recorder in California.

Now, the Government relies on an earlier 1872 statute which was not a cession statute, said nothing at all about cession of jurisdiction.

It merely said that California consents to the purchase of lands within the state for federal military purposes.

A similar statutory sequence was considered by this Court in James versus Dravo in 302 of United States, and there --

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes, yes.

Unknown Speaker: [Inaudible]

Mr. John Fourt: We run into a somatic difficulty here.

First, we assert that the 1897 statute controls the 1872 statute regardless of what the 1872 statute means.

And we say that the 1872 statute did not tender a transfer of jurisdiction of the United States, but if it did, it was qualified by the 1897 statute.

Now in the West Virginia statute considered in James versus Dravo, West Virginia had enacted an 1881 consent statute very similar to in the language to our 1872 statute and in 1931, had enacted a cession statute and in the cession statute, it said that the terms of the cession statute would apply to any lands acquired under the 1872 -- under the 1881 statute.

So in our case, we say that the reference in the 1897 statute to lands acquired by cession or by conveyance applies to any lands acquired by United States in the 1872 statute.

Now turning to our difference with United States for the meaning of the 1872 statute, we assert that in California when granting consent to the purchase intended thereby to give Congress another type of supremacy power over such lands.

It granted power to Congress to legislate and exclusively as the power to exercise exclusive legislation and the term exclusive there modifies legislation not power.

The Government would reverse the context there and would say that this was an exclusive power granted to Congress.

Justice John M. Harlan: [Inaudible]

Mr. John Fourt: No.

We -- this involves the Pacific Coast Dairy case also decided in 318 of United States.

There, as we read that case, California could not apply our Milk Stabilization Act to a situation where the sale occurred within exclusive federal jurisdiction.

The delivery occurred with an exclusive federal jurisdiction and the consumption of that milk occurred within federal jurisdiction.

And California in that case admitted all those facts in the state trial court by filing a demurer which admitted only allegations of the complaint filed in that action.

So that issue was never litigated in the Pacific Coast Dairy case.

Justice John M. Harlan: [Inaudible]

Mr. John Fourt: Yes.

In this case, let's take Castle as perhaps the best example.

The United -- California filed a suit to restrain a distributor from making sales to the Government -- to Castle at less than the state regulated prices and from -- and ordering it to pay its producers, dairy farmers minimum prices where delivery occurred on Parcel 12 which is within the main part of the base.

Ten days later, the Government ordered the contractor to discontinue delivery to Parcel 12 and to commence making deliveries outside of the base to another little parcel called Parcel A, Civilian Housing Project.

And then the Government -- and the Government tractor then picked up the milk at Parcel A and hauled it into to Parcel 12 where the milk was consumed.

Again, at Castle, the contract was not signed there, but was manually approved by higher headquarters so that on Parcel A, the contract wasn't signed there and the milk wasn't consumed there.

All that occurred on Parcel A was the delivery.

We submit then that this small relationship between Parcel A and the Government then would distinguish the Pacific Coast Dairy case from our situation and even if the Court would find Parcel A an exclusive federal jurisdiction that notwithstanding, California should be able to enforce our law against that contractor because of the majority of things that occurred in this entire transaction occurred without Parcel A.

Unknown Speaker: [Inaudible]

Mr. John Fourt: The record does not disclose where that higher headquarters were located but we believe that wherever this higher headquarters occurred where the United States officer who had authority to sign contracts over $25,000 in amount where he executed the contract and accepted the offer of contractor -- of contract tendered by the independent contractor.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes, that is correct.

I used the term sale here to mean the contract which made provisions for the subsequent passing of title.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Well -- no, I would not say it's irrelevant.

I would say passage of title occurred at the place of delivery but the -- while relevant, in fact issue alone is not decisive of the case here.

Thus, for example, the record shows that the United States has changed its receiving points of milk both at Travis Air Force Base and Castle Air Force Base so as to take delivery on parcels which have the best jurisdictional credentials.

If the Court prevails of this issue, if they can find one acre tract in California where the Government has exclusive jurisdiction then the Government can take delivery of all of its milk on this parcel and by transshipping itself then, supply its needs throughout California.

Indeed then, this one parcel would be a thorn in the side of California.

Justice Arthur J. Goldberg: What would your reaction be if there was a military base in which you admit there's exclusive jurisdiction that some of the personnel as is often the case lives of the base and the milk was consumed by that personnel off the base.

[Inaudible] that there are a little circumstances that the Government was willing to cover that circumstance?

Mr. John Fourt: No, both because the statute as written and interpreted by our highest state court does not apply to the United States.

And secondly, if the California legislation did change our statute, it would be unconstitutional.

Once the milk is delivered in United States concededly then, it is beyond state control.

Thus, for example, the out of store commissary grocery store price is beyond our control as far as we're concerned to -- as far as our power and our statute, they could give the milk away.

Now, with respect to this question which we believe of first impression as to whether the power of Congress to exercise exclusive legislation of these bases purchased with state consent as to whether that is per se exclusory of state law or is exclusory of state law only as implemented by Congress.

We submit that policy considerations lend themselves to deciding that this is not per se preemptive, but is a power which is effective when Congress implements it.

And we take it -- conceded here that Congress has not exercised this power of exclusive legislation to our state law although we grant that it can do so at any time.

The President's depart -- in a departmental committee in the study of jurisdiction recommended that federal agencies neither acquire nor retain exclusive jurisdiction and this is for the reasons that these areas are no longer part of the states and the residents of those areas, particularly in the defense housing projects in the -- can no longer obtain the benefits of state citizenship, that is, the states have held for example that a resident of an area with an exclusive legislation cannot have as the state probated, cannot secure divorce, his children may not attend the public schools and in many states that such person lose their franchise.

And for this reason the Interdepartmental Committee of the President suggested that federal departments neither acquire nor retain exclusive federal jurisdiction.

And indeed the army regulations point the same fact out and say that it is army policy neither to acquire nor retain exclusive jurisdiction.

Justice John M. Harlan: Do you concede that your case has to stand or fall on whether there is exclusive federal jurisdiction?

Mr. John Fourt: No.

The wholesale price regulations will have to stand and fall on whether enough occurs within these military installations which then would nullify the state's attempt to enforce our statute off of those installations.

But our minimum dairy farmer price regulations apply to the transaction between the distributor and the dairy farmer far removed from the military installation.

And therefore, the land jurisdiction problem is not decisive or dispositive of the whole case.

Now, the United States had suggested that this Court not pass on part of the issues of this case, and that is the -- as to whether the state can apply our law to transaction occurring off the military installations.

And we should like to point out that this is still a burning issue --

Chief Justice Earl Warren: What part was that again please?

Mr. John Fourt: Yes sir.

The District Court held our entire statute unconstitutional both the minimum dairy farmer price regulations and the wholesale price regulations.

The Government suggests that the issue on diary farmer price regulation is moot because as a matter of procurement policy, they've said they will not assert this constitutional immunity.

This does not answer the problem because following the stay granted by Mr. Justice Douglas we repaired to the state courts and the distributors against whom we sought to enforce our law with the assistance of the Government then raised this constitutional issue.

The Government has not waived it.

They merely said they will not assert it and so this is still very much a burning issue.

Secondly, it has been our practical experience that we cannot enforce our minimum dairy farmer price regulations against distributors effectively without the wholesale price regulations.

If competition forces the distributor to sell milk at such a low price that his returns are inadequate to cover anything, but his own cost then there's nothing left for the dairy farmer and this has been our experience.

Well, there are many issues which we have not raised here and which we do not abandon and in our brief, but we wish to summarize that under the State Milk Stabilization Act, the Government receives the lowest wholesale price available to any customer in California.

This price is 12% below any price that a competing retail grocery store can obtain.

The Government does not ask for equal treatment, but preferential treatment.

They do not want to pay roughly 18 cents a quart.

They want to pay 11 cents a quart and the invidious discrimination here against the consumers of California is shown by the fact that the out of store retail price in commissaries is 11 cents a quart, the out of store minimum competing retail grocery store price is 24 cents.

Now, we think then that the preferential treatment that is the allowance, the better treatment given to the United States under state regulation is now consistent with the purpose of our statute and that is it roughly gives the United States 2 cents a quart advantage over any other wholesale customer other than state agencies.

If the Government obtained this preferential treatment, we feel that this will largely undermine and destroy our state's efforts to protect its vital food supply.

Turning to land jurisdiction, we feel that neither the Constitution nor state statutes support the Government's claim to exclusive jurisdiction over these lands and that it asserts this claim to exclusive jurisdiction for the valid purpose of obtaining preferential treatment in this purchase of milk and that it -- in its claim for preferential treatment, it minimizes the considered policy considerations adopted previously by the army and by the President in his report that on balance, state jurisdiction giving municipal laws and services to this land -- to these military installations is preferable to exclusive federal jurisdiction.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes sir.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes, that is correct.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes, that is correct.

Justice Byron R. White: And even if we have [Inaudible] you don't have to be [Inaudible]

Mr. John Fourt: Yes, that is correct.

Justice Byron R. White: Namely [Inaudible]

Mr. John Fourt: Yes, that is quite correct.

Justice Byron R. White: And did you do -- did you -- that if there was not [Inaudible]

Mr. John Fourt: Yes, oh, that is quite correct.

If Congress speaks, that ends it.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: We know of no other law which would conflict with our Milk Stabilization Act and no other law --

Justice Byron R. White: [Inaudible]

Mr. John Fourt: Oh yes, of course, that is the issue here and there of course, we stand on Penn Dairies on the ground that the procurement statutes there held not to conflict with the Pennsylvania Milk Stabilization Act are in essence the same as those in effect today.

Justice Byron R. White: [Inaudible]

Mr. John Fourt: Yes, that is correct.

The statute authorizing issuance of implementing federal regulations give no hint or suggestion if those regulations were to supersede state law.

And if you read the regulations they give no suggestion or hint that state law was to be superseded.

Their emphasis is on competition and we think that they fall within the framework of Congress and that Congress in its procurement statute gives no hint nor has it overruled, legislatively overruled the construction given the procurement statutes in Penn Dairies by this Court.

Unknown Speaker: [Inaudible]

Mr. John Fourt: Yes.

That their burden -- this economic burden was not involved -- that involving non-economic burden, interference with a vital military function, transportation function.

Now, I wish to clarify what would occur if California exercises jurisdiction of these military bases.

The Federal Government obviously has physical control of those bases and California statute may not impair the exercise of the federal function of those bases.

But on many of these bases in the housing authorities, the sheriffs of the counties in California are called in to maintain order among the teenagers in the housing districts and the disputes between husband and wife and so on, so that California peace officers do perform their duties and exercise their jurisdiction in most of the installations today in California.

Chief Justice Earl Warren: Mr. Solicitor General.

Argument of Cox

Mr. Cox: Mr. Chief Justice, may it please the Court.

I believe it might help to put the legal issues in context if I were to take a moment to summarize the facts of the case and the way it got here.

You will recall that this case involves the procurement of milk at three large installations of the military services in California, Travis Air Force Base, Castle Air Force Base and the Oakland Army Terminal.

The milk prior to the beginning of this controversy was purchased through the normal methods of procurement by the Department of Defense, that is to say bids -- there was an advertisement for bids.

The Government received responses.

It accepted a bid and then in due course, the goods were delivered.

Most of the contracts were for a time at prices below any of the California milk prices which I'll come to in a moment.

In the particular cases with which we deal as of the time of the trial, the officer who advertised for and received the bids was on the area -- in the areas over which we claim exclusive federal territorial jurisdiction and deliveries were made within the areas over which we claim exclusive territorial jurisdiction.

Most of the contracts before he could send out notice that he accepted the bid had to be referred to some higher authority.

The record doesn't show where the higher authority was, he might have been here in Washington D.C. for all the record shows, he would notify the procurement officer at Castle or Travis or Oakland as the case maybe and that officer would then send out from his location within the federal enclave I assume for the description that it is a federal enclave, the notice to the milk company and in due course delivery would be made at that same spot.

Many of these purchases, I say, were at prices below the prices fixed by California law.

Now, California statute provides a system of milk price regulation which authorizes the director of agriculture.

Justice Byron R. White: Mr. Solicitor General, can you tell me about the contract or [Inaudible]

Mr. Cox: Well, to tell the truth, I haven't investigated that particular point.

Justice Byron R. White: [Inaudible]

Mr. Cox: Over certain -- up to certain amounts I believe.

Justice Byron R. White: Yes.

Mr. Cox: Yes.

Justice Byron R. White: You don't [Inaudible]

Mr. Cox: I don't -- I don't really know Mr. Justice White.

I don't contribute any significance to it except that I suppose if it wasn't a two-way contract then it is all the clearer that the sale was made within the enclave, but we would think the sale was made within the enclave anyway regardless because you see, the sale I think means not contract of sell but sale.

And second, I take it if I remember by contracts correctly that a contract would have been made when he mailed the notice of acceptance and he mailed that within the enclave.

Chief Justice Earl Warren: Mr. General, I wonder if this is just the policy of the Government that these three bases we have a number of bases in California with various kind of enclaves, does the Government operate in the same way in all of them or just in these three because of a particular --

Mr. Cox: No, they're --

Chief Justice Earl Warren: -- officers that are involved?

Mr. Cox: Well, there are three -- I think really a correct answer to your question would involve two points. One, the state of the sovereignty over on these bases in California varies considerably because they were acquired at different times and there have been different state statutes from time to time.

The policy of the executive branch of the military is varied from time to time.

So it wouldn't be fair for me to say that these are typical of all the bases in California.

It is true -- two other things are true, however, there are many other installations where we would take exactly the same position with respect to territorial jurisdictions we do here. These are the ones where we felt the interference as I will describe in the moment.

Chief Justice Earl Warren: I see.

Mr. Cox: Second, I should emphasize Mr. Chief Justice that two of the three arguments on which we rely here apply regardless of whether this was territory over which we have exclusive legislative jurisdiction.

So that we assert with respect to the procurement statute regulation and with respect to the implied constitutional immunity that regardless of the question of territorial jurisdiction, California cannot regulate these contracts of the United States.

I was about to describe very briefly the basic California Milk Control Law.

I think the essential parts of it so far as we are concerned are three-fold.

First, it authorizes the director of agriculture by order to establish the prices which handlers or distributors and this would include cooperatives acting as handlers or distributors they must pay to the funds for reasons I will explain later, we are not concerned with those prices any longer in this case.

Second, California authorizes the director of marketing or agriculture to set the price charged by the distributor or handler or perhaps I could call properly the resale price and it is those prices with which we are now concerned in this case, and only those prices with which we are now concerned.

There came a time when the California authorities threatened the handlers who were selling milk to the Government at prices below the California price that their licenses would be taken away that they would otherwise proceed against them under the California law and this led to the handlers no longer bidding in free competition but submitting bids in accordance with the state minimums.

Accordingly, the United States in order to protect this interference with its prospective sellers brought a bill against the California authority to enjoin them from taking steps to enforce the California Milk Control Law.

And as the case was originally tried, it apparently did involve both an effort to stay enforcement generally and a direction not to proceed further with this particular case in the state courts.

As to that particular case, we think there may be some doubt about the propriety of the interlocutory orders of the final orders is simply in the customary form and stays state authorities from taking steps to enforce the law and therefore involved we think no interference with proceedings in a state court which would of course violate the jurisdictional extensions.

That suit was based upon three grounds.

First, the Untied States alleged that these three bases were within its exclusive legislative jurisdiction and that therefore any attempt by California either to apply its laws directly within those bases or to prosecute people for taking steps which would be unlawful only because of what they did later within those bases was an interference with the exclusive jurisdiction of the United States and unconstitutional under the Pacific Coast Dairies case.

Second, we asserted that the California Milk Control Law as applied was in conflict with the Armed Forces Procurement Act and the regulations under it and therefore it was invalid under the Supremacy Clause of the Constitution and for that, the United States relied on the California Public Utilities Commission case.

The third ground which was raised in the lower court and which we still press was that for California to apply its Milk Control Law to these purchases regardless of any question of territorial jurisdiction and regardless of any question of federal statutes was in direct conflict with the implied sovereign immunity of the United States.

And we continue to press all three points.

Now I should emphasize -- I'm getting a little hand of myself, the District Court called in to --

Justice William J. Brennan: [Inaudible] Solicitor General but I gather any one of those three has merit, we don't have to --

Mr. Cox: Then you don't have to decide the other, that's correct.

That's --

Justice Potter Stewart: The District Court --

Mr. Cox: -- not excluded.

Justice Potter Stewart: Excuse me.

Mr. Cox: Excuse me.

That -- I did not give Mr. Justice Brennan --

Justice Potter Stewart: I beg your pardon.

Mr. Cox: -- a 100% accurate answer.

I'd prefer not to get in to the detail now but so far as the procurement statutes go, there was some of the milk bought at some -- one of the bases which would not be under the procurement statute.

This is the milk bought out of the officer's club revolving fund and I suppose strictly that that would -- if you decided first on that ground, it would still remain at X percent of the milk which have to be --

Justice William J. Brennan: I think your second ground wouldn't reach that if your second ground was sustained.

Your second --

Mr. Cox: You would reach that you would have to consider one or three --

Justice William J. Brennan: In order to take care of that.

Mr. Cox: In order to take care of that, yes.

Now, Mr. Justice Stewart --

Justice Potter Stewart: The District Court accepted the.

Mr. Cox: The first two --

Justice Potter Stewart: -- your first two and didn't --

Mr. Cox: First two.

Justice Potter Stewart: -- consider at all.

It didn't mentioned the (Voice Overlap) --

Mr. Cox: It didn't mention the third.

The District Court did issue the injunction on the first two grounds as Mr. Justice Stewart said and we -- and the state brought the case here upon a direct appeal.

The Court postponed the question of jurisdiction until the argument on the merits citing Kessler against the Department of Safety, the Utah case involving the discharge of bankruptcy.

We think it's quite plain that this Court does have jurisdiction on appeal.

The question is of course you will recall is whether a three-judge court was required.

We think it's plain that a three-judge court was required to consider at least the first and third grounds on which we challenged the state statute.

Certainly, the ground that we challenge it because it invaded the direct implied sovereign immunity of the United States raises a direct constitutional issue.

There's no possible question of interpretation.

The first ground maybe a little more complicated, but since California asserts that regardless of whether we have exclusive territorial jurisdiction, she may apply the state law within federal enclave, that too I take, raises a direct constitutional question.

Of course the three-judge court is required where there are such direct constitutional challenges to a state statute even so the state statute is challenged on some other ground such is that the area has been preempted by the federal statute which was our second ground.

The three-judge court being required, the case comes here on direct appeal but even so the three-judge court may base its decision on some non-constitutional ground or as I would put it here, some indirectly involved constitutional ground that I think the Court doesn't have to deal with the problem involved in the Kessler case because there clearly is jurisdictional under any theory.

I turn now therefore to our first ground for sustaining the decision below, the argument that the territory in which the sales were made is under the exclusive territorial jurisdiction of the United States, so this attempted state regulation violates Article I, Section 8, Clause 17 of the Constitution.

The basic elements of the Government's case in that regard are really very simple.

Article 1, Section 8, Clause 17, you'll recall, provides that “Congress shall have power to exercise exclusive legislation in all cases whatsoever over such a district,” this is the district where the Government seated, “and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be for the Erection of Forts, Magazines, Arsenals, dock-Yards and other needful buildings.”

Here we say that the Government purchased the land that's involved in these cases that it was done by the consent of California given by a statute that the United States accepted the exclusive jurisdiction as required by a 1940 federal statute.

And that the result under a long line of decisions by this Court, state courts, lower federal courts, is that did the state lost any power to tax or to regulate in any way conduct within that federal enclave.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Cox: I believe they were all purchased by agreement.

The details are in the record.

I now propose to take the Travis Air Force Base and go through the argument in somewhat more detail.

I was just trying to provide a skeleton on which to put the more complicated points.

Justice William J. Brennan: Mr. Solicitor General, just the fact of the -- these purchases involved in this case, are they all from handlers?

Mr. Cox: Yes.

Justice William J. Brennan: All from handlers?

Mr. Cox: Yes.

I should have --

Justice William J. Brennan: Is it (Voice Overlap) --

Mr. Cox: I think I can answer that a little more.

Indeed, I haven't planned to state the facts at the beginning and I got a little (Voice Overlap) --

Justice William J. Brennan: Well, don't [Inaudible]

Mr. Cox: No.

It's an important point to my case really.

I did want to emphasize and explain the reason for my statement that we were not any longer concerned with the prices received by the farmers, milk producers.

Now, originally I think, as the case was litigated in the lower court, that was to a degree involved and when the case first came up on direct appeal, the question was raised as to whether the Government either could complain of the regulation of those prices or even if it could whether it should and after discussion within the executive branch of the Government, it was decided that the Government should not, whether it could or not, should not seek an injunction against the enforcement of the state prices so far as producers were concerned.

And we've taken that out of the case I think completely, but if we haven't, I do so, so far as I have power now, in three ways.

In the first place, we consented to a partial stay issued by Justice Douglas which modified the original injunction so as to stay such portion of said injunctions which enjoin appellants from enforcing against producers or distributors of milk or milk product, the minimum producer of milk price regulations promulgated by California and so forth.

Second, we stated in our jurisdictional statement that this was our view.

Third, the Secretary of Defense in response to an inquiry from an order really from a congressional committee wrote to the appropriation committees of the House and Senate this summer.

The state law's most concern of this connection is those which establish minimum prices, he was talking specifically about milk prices and only milk prices.

The Department of Defense does not oppose state regulation of minimum prices to be paid by handlers to farmers nor does it oppose milk marketing orders issued by the U.S. Department of Agriculture which likewise regulates the amounts to be paid to the farmers who produce milk.

It does oppose state regulation if the price is to be charged by handlers and others selling milk to the Federal Government.

This leaves -- takes out of the case entirely, so far as I can see, any question of the welfare of the farmers --

Justice William J. Brennan: Well, would that mean at the very least even if there would be an affirmance that there would have to be a modification which in effect was to make permanent --

Mr. Cox: I think the stay -- I think even if there were to be an affirmance, the qualification added by --

Justice William J. Brennan: Justice Douglas said it.

Mr. Cox: -- Justice Douglas should be written into the decree without any --

Justice Byron R. White: [Inaudible]

Mr. Cox: To avoid any doubt -- I'm not sure if the decree really covers it anyway.

But to avoid any doubt, it should be put in.

Justice Byron R. White: It takes care of everything in that area except the economic reality?

Mr. Cox: I would think not.

The Department of Agriculture has now for 23 or 4 years fixed the prices to be paid produced.

Justice Byron R. White: I don't question their -- I don't question their power or their (Voice Overlap) --

Mr. Cox: Well, but if anything [Inaudible] there had been many places where that is the only --

Justice Byron R. White: Now, that the price that -- what level they have to be fixed?

Mr. Cox: They can be fixed at any level --

Justice Byron R. White: Well --

Mr. Cox: -- and enforced.

Justice Byron R. White: Well, I doubt that if the distributors can't pay, and the real question is whether how -- how was the ultimate consumer price for milk that's going to be divided between producers and distributors?

Mr. Cox: I think the way it is worked out under many federal orders has been that the distributor has to charge an amount necessary to pay what he is required to pay the producers or else he goes into bankruptcy.

But the -- as a -- at least in my experience with milk --

Justice Byron R. White: Well, (Voice Overlap) --

Mr. Cox: -- carriers to that result has not been that thing distributors regarding bankruptcy.

Justice Byron R. White: You're suggestion is that the Government would never bargain an amount [Inaudible]

Mr. Cox: That in effect that it wouldn't and couldn't that what we are bargaining over, what we're trying to protect here --

Justice Byron R. White: Even a small dairy begins to take care of themselves.

Mr. Cox: Some of the small dairies would not be as effected, they have been selling -- they would not be able to sell to the army, that's correct --

Justice Byron R. White: That's to the army.

Mr. Cox: That's true.

But that question of policy, I suggest, is not one for -- to be decided in constitutional terms or for California to decide.

Here, coming back now to the question of exclusive territorial jurisdiction, I would like to follow through with the Travis Air Force Base in order to show in a little more detail our argument and try to meet California's contentions.

The lands constituting those parts of the base in which the milk was purchased or delivered in the manner I described before was brought in this case from private owners between December 4, 1942 and March 1, 1943.

There's no question that the land was purchased for the military purposes, forts, arsenals, dock-yards and other needful buildings within the constitutional frame.

We contend that California gave her consent to that purchase by the United States under a statute which is set forth at page 99 of our brief.

The Section 34 of the California Political Code begins down to the last quarter of that page.

Justice Tom C. Clark: What page is that?

Mr. Cox: Page 99 Justice Clark.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Cox: Page 99 of the Government's brief --

Justice Arthur J. Goldberg: [Inaudible]

Mr. Cox: -- which is -- and I'm about to call your attention to Section 34 of the California Political Code.

The legislature consents to the purchase or condemnation by the United States of any tracts of land within the state for the purpose of erecting forts, magazines, arsenals, dock-yards and other needful buildings upon the express condition and then there followed three conditions that civil process issued by the courts of the state shall be effective, the criminal process issued by the courts of the state shall be effective and that the state shall retain certain powers of taxation, but except for those qualifications, the consent to purchase is given by that statute and in unqualified terms.

Now our argument is that under the very words of the Constitution itself, once the state have given consent to purchase the land, the United States then has the exclusive power of legislation which means exclusive jurisdiction and that that then and there automatically excludes any exertion of authority by California.

Justice John M. Harlan: Irrespective of what the Cali -- the United States could exercise its power?

Mr. Cox: On -- since 1940 and therefore in this case, it would be necessary for the United States to state that it accepts such jurisdiction but there are letters from the Secretary of War, Secretary Stimson to the Governor of California stating that the United States does accept jurisdiction over the land in question and it is immaterial whether the Government then enacted any legislation dealing with the territory.

Of course, there many laws were made applicable by the Assimilation Act and other criminal laws had been enacted dealing with conduct within the base.

But it takes nothing more than the purchase with the consent of the state and that consent is given here.

Now the earliest expression of that kind that I have been able to find, goes back to an opinion to Mr. Justice Story in United States against Cornell.

There he said, in summing up to the jury, that's much decided in the Forts case, “when therefore purchase of land for any of these purposes”, that is forts, magazines and so forth, “is made by the national government and the state legislature has given its consent to the purchase, the land so purchased by the very terms of the Constitution ipso facto falls within the exclusive legislation of Congress and the state jurisdiction is completely ousted”.

This is the necessary result where exclusive legislation is -- exclusive jurisdiction is attendant upon exclusive legislation and the consent of the state legislature is by the very terms of the Constitution by which all the states are bound to which all apprise a virtual surrender and session of its sovereignty over the place.

Then he directed himself a few paragraphs later to one of the arguments made by California here to with that they didn't expressly say we cede jurisdiction and they simply consented perjury and referring to that argument as the argument of the prisoner, he said here, the argument of prisoner's counsel is in the first place that the Act of Rhode Island contains no cession of jurisdiction in terms and the consent of the legislature through the Government and the purchase is not a virtual session of its sovereignty over the place.

That argument has been sufficiently considered already from the passage I previously read and stands repudiated by the expressed terms of the Constitution.

Justice Hugo L. Black: Is that cited in your brief?

Mr. Cox: I --

Justice Hugo L. Black: I didn't find it.

Mr. Cox: No, it's quoted at length in several of the cases cited in our brief including the Fort Leavenworth case and the opinion by Mr. Justice Van Devanter in Surplus Trading against Cook.

I thought this was a little clearer statement than some of the others.

The citation, it's to Mason, Mr. Justice Black, I'm afraid I lost the page when I closed the book.

Justice Hugo L. Black: It's alright.

Mr. Cox: There are many other decisions --

Justice Hugo L. Black: United States v. Cornell?

Mr. Cox: Yes.

There are many decisions by this Court and innumerable other courts stating that same proposition.

California's argument, as I understand it, is based upon another California statute, conveniently found at page 98 of our brief, down at the bottom.

This is the California statutes 1897 which was carried forward and was in effect at the time of these purchases.

There it provides, the State of California hereby cedes to the United States of America, exclusive jurisdiction over all lands within the state now held, occupied or reserved by the Government of the United States for military purposes or defense or which may hereafter be ceded or conveyed by the United States for such purpose.

And then there are -- oh, then the next phrase, provided that a sufficient description by meats and bounds and a map or plat of such lands be filed in the proper office of record in the county in which the same are situated.

Now in the case of Travis, we never filed any plat or description of the land under the statute.

It's being our view for reasons I shall explain in a moment that this statute has nothing to do with the case.

We think that it -- there are four objections to California's view.

The first is that as I said before, no session is required under the Constitution.

Purchased with consent under Article I and the authorities I cited, automatically transfers jurisdiction and no cession by the states under the very language of United States against Cornell and later cases is required.

To that, California replies, if I understand it correctly, that Section 34 of the Political Code which I have upheld the consent to purchase, doesn't really consent to purchase within the constitutional sense at all.

It meant consent to purchase -- it meant simply that you can go in and buy the land, the Federal Government but we don't consent you purchasing it for constitutional purposes.

While there is nothing in the statute that suggests that and indeed there is a good deal that shows the opposite for one thing that the United States doesn't need a state's consent to purchase land or to acquire land by eminent domain.

It needs it to purchase it and have the Constitution called into play, but ever since Cole against the United States, it's been clear that you don't need consent just to get a proprietary interest.

Second, the consent to purchase statute shows on its face that it means a consent to purchase which will operate under Article I, Section 8, Clause 17 of the Constitution.

I say that because you will note that the consent to purchase statute, I'm now back at page 99 of the brief at the bottom, contains three qualifications or conditions which would make no sense at all if California were not otherwise contemplating a transfer of jurisdiction under the Constitution because of the consent to purchase.

One condition is that civil process issued under the courts of the state and certain criminal process maybe served and executed within the enclave and now there would be no need to do that if California had reserved all its jurisdiction.

Equally, the third condition is a reservation of the power of taxation.

There would be no need to do that if California supposed that it is reserving all its jurisdiction.

More fundamentally I think, the source of confusion in the argument for California and the reason for its misconstruction of the cession statute is that it disregards the very important fact that there are two methods of acquiring land and exclusive jurisdiction and that one method is dealt with by the consent to purchase statute and the other method is dealt with by the cession statute.

Now, let me explain that in a little more detail.

The first, the consent to purchase is clear enough that the United States buys as the consent of the state either given ad hoc or by a general statute and automatically jurisdiction passes.

The United States may also have title and possession to lands within the territory of the state for reasons other than a consent to purchase within the Constitutional Clause.

For example, in California as in many other Western states, the large areas of retained lands that never passed to the state so far as the proprietary ownership is concerned and many of those were set apart as reservations.

Two excellent illustrations are the Presidio in San Francisco at Golden Gate and Fort Leavenworth in Kansas.

In both of those cases, the United States have the proprietary interest but it didn't acquire it by purchasing it with the consent of the state because it always had it.

Another illustration would be a purchase of land without the consent of the state where you might have the title and possession but not jurisdiction.

And a third illustration would be an acquisition of land for a purpose other than one listed in Clause 17.

For example, an acquisition of land for forest purposes as one of the Arkansas cases cited in the brief.

In all these instances, exclusive jurisdiction would not pass automatically to the United States and if the United States was to get exclusive jurisdiction, it would have to do it in some other method.

Back to Fort Leavenworth Railroad against Lowe which was decided in the 1880s, the Supreme Court then held in an opinion by Justice Field that in the types of cases I've mentioned where Clause 17 was not applicable, the United States might get exclusive jurisdiction by a cession from the state.

And indeed, the State of Kansas had ceded Fort Leavenworth, jurisdiction over Fort Leavenworth to the Federal Government and in another instance, the State of California ceded jurisdiction over the Presidio in San Francisco to the United States.

So that there came to be a second method by which the Untied States might obtain exclusive jurisdiction.

We think it entirely planned that the Act of 1897, the one on which California relies and the one that begins at the bottom of page 98 of my brief is a statute that deals with the session of jurisdiction where the United States had acquired proprietary interest, but the consent to purchase statute was inapplicable.

And it seems to us that Section 34 of the Political Code, the one beginning at page -- at the bottom of page 90 of our brief, is the one that deals with consent to purchase and it is the one that is applicable here because this was a purchase with the consent of California under that statute.

Now, the later California statute of 1939 which is set forth beginning -- it's really the second paragraph of Section 34 of the Political Code, the one I referred to, running over on page 100.

It seems to us to make it quite clear that at the time that was written, California draftsmen realized that there were these two methods by which the United States might acquire exclusive jurisdiction, only one of which required this plat.

The second par -- the first paragraph you'll note, speaks of the consent to the purchase and reserves certain limited jurisdiction thereby implying that the United States gets the rest.

The second paragraph says the authority deserves civil and criminal process and the tax here and above reserve the state.

In the case of the purchase or condemnation by the United States of any tract of land within this jurisdiction shall to any law contrary notwithstanding also be reserved to the state with respect to any tract of land over which any jurisdiction is ceded or granted by the state of the United States.

There, within the very statute that we think is controlling is a reference to there being another method of ceding jurisdiction in cases that don't come under the first paragraph.

I should point out finally that the Attorney General of California did himself recognize in 23 opinions of the Attorney General of California at page 14 that there are these two methods by which the United States may acquire exclusive jurisdiction and that the consent to purchase statute deals with one and is governing in that case and that the session statute which alone requires the requirement of the filing of the plat is -- deals only with the second method sessions and has no application where there is a consent to purchase.

Once this essential distinction is understood, many of the points made by the petitioner in his brief become clarified and dropped by the wayside.

For example, he quotes at some length from the case of Wilson against Cook, a case dealing with forest lands in Arkansas where the question of exclusive jurisdiction was raised and he quotes language saying that since there was no cession by the state, the United States didn't get exclusive jurisdiction.

Well, that's quite true.

The consent to purchase procedure obviously wasn't applicable there.

They were talking about forest lands and the consent to purchase procedure could possibly come into play.

Similarly the references to the acts of submitting Hawaii and Alaska, where some exclusive jurisdiction was expressly retained by the Congress over military installations.

Well, the reason is of course the consent to purchase statute wouldn't have anything to do with it because this wasn't land purchased by the United States.

And if you're going to keep exclusive jurisdiction, it has to be arranged when the states were admitted.

Now, I mentioned the final point earlier, since 1940, the federal statutes have provided that a consent to purchase shall not automatically transfer jurisdiction unless the head of the department, in this case, the Secretary of War or later the Secretary of Defense signifies his assent to the passing of jurisdiction, but this was done in letters to Governor Warren in 1943 and 1944, referring to this land at Travis Air Force Base so that final step was accomplished and indeed accomplished within a very short space after the land in question was purchased.

The situation with respect to Oakland, I'm now done with the general part of the argument and I am done also with the legal details, the situation with respect of them requires a very brief mention.

The District Court's opinion at page 563 speaks of the Federal Government acquiring the land on which the milk was purchased in 1950.

That's an error and an error for which I regret to say the Department of Justice was clearly responsible because it was stated in the brief.

The land was purchased, the land on which the milk was purchased was acquired considerably earlier than that, plot B210 which is the area in question, was purchased on March 2, 1942 and all the argument that I've just gone through with respect to Travis is precisely applicable to it.

It is also true that apparently, we went through the process of getting exclusive jurisdiction again under the cession statute and that's what the District Court refers to in its opinion.

The land at Castle is governed by exactly the same principles.

I should mention just one little point with respect to it.

The land at Castle on which the milk is purchased first came into the possession of the United States under the Lanham Act dealing with housing.

I say into the possession because it was not purchased at that time.

It came into possession of the administrator under the Housing Administrator under the Lanham Act.

Later, the possession was turned over to the Secretary of War and while it was in the possession of the Secretary of War, the United States bought it from private owners.

The argument is made by California that because Section 10 of the Lanham Act provides that the acquisition of the administrator of any real property purchased pursuant to this Act shall not deprive any state of its civil or criminal jurisdiction that this could I suppose he says, the covenant running with the land on this piece of land and it never attached into the exclusive jurisdiction of the United States.

I think it's enough to state the argument surely it kind of contemplated that if the land were later bought from private owners by the Secretary of War that it would still have this burden attached to it.

And therefore, we think Castle is governed by the same rule.

It follows if my argument is sound that the United States did gain exclusive jurisdiction over the territory within which these purchases were made and conversely that California had no power to apply her milk control law to the transactions within the enclave.

California does argue that well, the Constitution although it says the United States shall have the power of exclusive legislation, it doesn't really mean that.

I think it's enough to say that that contention as at adds with 150 years of constitutional history in a mass of decisions by this Court, by lower state courts, opinions of Attorneys General, all, clearly holding that the Constitution is self-operative in this respect.

And they -- by the court -- this Court has excluded state tax powers, it's excluded state criminal laws and other kinds of state regulations.

I just don't know at any point that this is well settled.

Now California's other argument with respect to the territorial jurisdiction is that somehow the California statute was assimilated in the federal law.

The two ways, in which I could dream of that this might happen.

There is a 1948 federal statute, 18 U.S. Code Section 13, the effect of which is to make law within a federal enclave, any state criminal law which is within effect in the state at the time the crime is committed.

This isn't like the old Assimilative Crimes Act that applied only as of the time the jurisdiction was taken of it.

This applies to current criminal law.

California as I understand doesn't rely on that statute if I'll mention it just for clarity for I take it, two reasons.

In the first place even if those -- even if this law were assimilated it becomes a federal crime.

It's not something that California authorities are charged with prosecuting or that the California courts have jurisdiction to deal with.

Second, it seems to me although I can't support any -- cite any cases for the proposition that the Assimilative Crimes Act was not intended to take over a whole regulatory measure resting on state administrative action adherent are quite different from the normal type of criminal offense, the things included in the criminal code.

The remaining argument with respect to territorial jurisdiction is that well, even if we don't apply our state milk control law to the purchases within the enclave, still there is a provision of California law which prohibits anyone to process or handle milk which he is going to sell at a price below the California price.

And as I understand Mr. Fourt in his brief, he is saying, “Well, we can enforce that section anyway.”

Our answer --

Justice Potter Stewart: Against who?

Mr. Cox: Against the handlers.

Justice Potter Stewart: Yes.

Mr. Cox: Our answer to that is that this is the very contention that was made in the Pacific Coast Dairy case and the very contention that was explicitly answered by Justice Roberts in his opinion in that case.

I don't want to take time to read the paragraph but he deals with it very expressively.

And certainly, nothing in that case makes the result turn on what happened to the milk after the Federal Government got it.

What it turns on is that you can't put it in simple terms.

You can't say that no one shall walk on the highways of California who is going to permit what California doesn't want them to do on the federal enclave where it's perfectly lawful for them to do it.

I point that I think clear beyond dispute.

Now, turning to the second --

Justice John M. Harlan: Could I interrupt you a minute?

Mr. Cox: Yes sir.

Justice John M. Harlan: Given your argument, assuming that you accepted what comes to Penn Dairies scenario, the --

Mr. Cox: Penn Dairies remains untouched given my argument on the point I've just made because Penn Dairies did not involve any question of exclusive legislative jurisdiction.

We would have in effect a reaffirmation of the Pacific Coast Dairies case which was decided on the same day as Penn Dairies.

We say that in this case, the Pacific Coast Dairies, and this disposes the matter.

Now with respect to my other points, I have to deal in somewhat more detail with the Penn Dairies case.

Our second main point is that the California Milk Control law is inconsistent with the federal procurement statute in regulation and therefore must deal under the Supremacy Clause.

This was pointed out earlier that the District Court sustained this contention on the authority of the California Public Utilities Commission case.

We think it was plainly right in upholding that contention.

The federal scheme embodied in the statute and regulations as I shall show directs the procurement officers to purchase at the lowest overall cost to the United States usually through competitive bidding on advertised request for bids, but if by negotiation then still in a process of negotiation, it brings back all of the competitive forces that will make sure that the United States receives the lowest possible price.

In this instance, the lowest possible price permitted in the way of markup over the minimum prices required to be paid to California milk producers.

The California law obviously would eliminate that kind of competition which the federal statute contemplates and therefore we say, that we too are inconsistent and that the California law must yield.

The point was squarely adjudicated in Public Utilities Commission of California against the United States and we think the case is controlling here.

In each instance, the case arose under the Armed Services Procurement Act of 1947.

The regulations are somewhat different because one dealt with the procurement of commodities, the other with transportation, but their thrust is indistinguishable.

The California Milk Control law leaves even less scope for competition or negotiation, but in the state clause you'll remember in the Public Utilities Commission case under which California Utilities Commission could permit negotiations, there is none here so the inconsistency is even greater.

The governing statutes are set out -- and regulations are set out in our brief beginning at page 104 for the statutes and then the regulations continue over on page 106 and 107.

When the Court rose yesterday, I was just beginning to develop the second of the three grounds on which we contend that these purchases were immune from California regulation.

That ground Your Honor's will recall as the California Milk Control law is inconsistent with the federal procurement statutes and regulations and therefore must yield under the Supremacy Clause.

Federal scheme as we read the statute and the regulations directs the procurement officers to acquire goods by a competitive bidding were possible and whereby negotiation, nevertheless, with enough negotiators to acquire the benefits of competition.

In that view, I think appears quite clearly from a review of the statute and also, particularly the regulations that are set forth in the appendices to our brief.

Justice Arthur J. Goldberg: (Inaudible) Solicitor General, if the Department has said is not (Inaudible)?

Mr. Cox: Because the regulations deal with the purchases of the Government and not with the purchases of the private handlers from the farmers.

We're concerned as I sought -- show yesterday, we're getting the benefits of competition at the handler level.

Now, we're not concerned with getting the benefits of competition at the producer level quite contrary.

Justice Arthur J. Goldberg: Do you think that was (Inaudible)?

Mr. Cox: I think I would have an exceedingly difficult case and I think in view in the interpretation put on the regulations by the Secretary of Defense.

At the present time, I would have a virtually impossible case because I should suppose that that interpretation by which is very firmly the view of the Defense Department at this time.

It's been reported to Congress, should be read as a rubric.

But this regulations deal with our purchasers from the distributors where we frankly do seek to get the benefits of competition so far as that margin is concerned.

I might say in that connection it was mentioned yesterday that United States' attorneys were in the California's courts seeking to aid the cause of the handlers with respect to the enforcement of producer price.

I've been able to find no evidence if that's so if theirs some misunderstanding here.

I certainly going to assure the California authorities that there's no doubt in Washington about what our policy is.

And we'll take steps to transmit those instructions if there had been any confusion.

A question was raised in the reply brief about the procurement regulations.

The reply brief states that the Government purports to quote them but the counsel was unable to find them in the code of federal Regulations.

The source of the confusion is that what we print in the back of the brief is the regulations as they appear in the record and those were the regulations enforced at the time the suit was brought.

Subsequently, there was a minor change made which involves some renumbering and the result is that unless you check through the numbers three -- 301 became 302 or 303 and things like that.

It is confusing but these regulations were the once in effect at the time and indeed the ones effect the day also the numbers are different, are substantially the same.

Justice Byron R. White: (Inaudible)

Mr. Cox: Well, I think its -- its certainly helpful to my case and we think that the same two differences that were pointed out in the Public Utilities case still exist today.

At the time of the Penn Dairies case, the old version of the regulation said that appropriated funds might not be used for payments upon awards, upon invitations for bids containing requirement showing compliance to the state price laws.

At least not until there'd been a final and authoritative determination that the state's statutes are applicable.

Unknown Speaker: (Inaudible)

Mr. Cox: That has been -- excuse me.

That's been released.

Then another difference was that the old version of the regulations had declared that competitive bids were not required when the price is fixed by federal, state, municipal or other competent legal authority.

That too has been taken out.

These differences were thought precisely by the court in the California Commission case.

The same differences exist today and we think that the California Commission case therefore rather than the earlier case is controlling.

Unknown Speaker: (Inaudible)

Mr. Cox: Well, I'm -- but, yes clearly.

Now, I don't see that there is any essential difference between milk and transportation in this respect.

I don't think there's any difference between kinds of transportation in this respect.

If we are talking about the policy and the procurement regulation, the same policy is laid down by the regulations in each case and it draws no difference between milk and transportation.

Indeed if there is any, it's that the policy expressed than the regulation is applicable to the procurement of commodity is more emphatic and clearer than the policy declared in relation to transportation.

Justice Byron R. White: What -- suppose there are (Inaudible) there if -- there is exclusive legislative authority in Congress.

It might be an important requirement if Congress has given an intent, the procurement (Inaudible) to accept or to honor minimum prices in the state?

Mr. Cox: I think it might be relevant but hardly decisive because the question that certainly Congress has done nothing it would seem to give its consent to California to apply California legislation --

Justice Byron R. White: Well, but (Voice Overlap) --

Mr. Cox: -- in the federal enclave.

And I think this Section saying, nobody shall prepare to do anything unlawful in the enclave is equivalent as the Court said in the Pacific Coast Dairy case to -- attempting to regulate what happens in the enclave.

Justice Byron R. White: Well, if Congress has said that to do that, if procurement officers do not try to bargain below the statement of the price fix (Inaudible) and then the procurement officer had and one of the distributors had given them a lower price.

Would -- wouldn't you think California could take action against the --

Mr. Cox: I would think if this happened in the federal enclave over which there was exclusive federal jurisdiction that California could not take action that this would be a matter punishable or by reprimand or if it's an offense by an information or indictment by the Federal Government.

Justice Byron R. White: (Inaudible)

Mr. Cox: It's still not the decision of legislative jurisdiction to California.

Justice Byron R. White: A fortiori (Inaudible) do -- have the order which was given to (Inaudible) procurement officers to (Inaudible) California couldn't do it?

Mr. Cox: If my first ground is good I think California no longer could -- I think California could not intervene.

Of course if they had given consent and expressed the policy of complying with state price control laws, then my second ground would be gone.

But it seems to make quite clear that Congress did not give the consent and that the statute and especially the regulations expressly opposing view.

Justice William J. Brennan: Mr. Solicitor General, in that respect, you said to me yesterday that purchases from revolving funds are not governed by the procurement regulations.

Is that by some exclusive provision in the regulations or is that also in the (Voice Overlap) --

Mr. Cox: The statute is applicable to purchases with appropriated funds.

Justice William J. Brennan: And that's the basis upon what --

Mr. Cox: That's the basis on which we rest.

So that really there are three kinds of milk involved here in all candor.

But firstly, the purchases were (Inaudible) branches then as to that my case stands just as I have stated.

At the other extreme are the purchases of officers' clubs, and other activities at that time which remained from a revolving funds and not about of appropriated funds and as to those, I don't think we can fairly argue that the procurement policy is applicable.

In between our certain purchases made for commissaries, purchases for resale.

Now as to those, I think my argument on the procurement policy is somewhat weaker and still think it's a valid argument but there are two points which can be made against them.

One is that Congress has indicated that where things are bought for resale, it is not -- is concerned with competitive bidding.

Now second, it has indicated that a commissary should not be established in areas where goods can be purchased at local stores nearby for the same prices.

Now Mr. Ford argues, I think with some parts that this indicates that -- or may indicate, that the milk bought for the commissaries, Congress wasn't so interested in competitive price.

My reply is that the same regulations apply that what Congress was concerned with was perhaps not having the commissary but once you have them and that determination has been made then they're governed by the same procurement policies as all other case.

Justice William J. Brennan: But in any event, if your enclave argument prevails, these reaches all three --

Mr. Cox: Yes.

Justice William J. Brennan: (Inaudible)

Mr. Cox: (Inaudible) by enclave argument prevails it clearly reaches all three and if the third point which I simply mentioned now so as not to waive it prevails.

This violates the constitutional immunity then it reaches all three.

Accordingly, if it pleased the Court, we ask if the judgment be affirmed with such modification as being -- maybe necessary to reflect the concessions that we made in our brief and that I have made here in the oral argument.

Chief Justice Earl Warren: Very well.

Mr. Fourt.

Argument of John Fourt

Mr. John Fourt: Mr. Chief Justice, if the Court please.

The thrust of the Government's argument we feel is pertains to what has been described as the enclaved position.

That is their claim that the United State has exclusive jurisdiction over these installations.

Our position is that this is indeed a recondite and difficult question, a question of first impression.

We want to illustrate that it is difficult by citation of two different lines authorities.

First, in our brief, we have cited that the (Inaudible) General of the Army has issued two opinions which are inconsistent with the position now taken by the Government.

Those opinions are cited in our brief so that we have inconsistent administrative interpretations by both California and the United States.

And secondly, we want to briefly advert to the case cited yesterday, United States versus Cornell, 25 Federal cases, page 646.

In that case, the Court had before it a 1791 Rhode Island statute.

And this Rhode Island statute was a session statute not a solely a statute, such our 1872 statute but a session statute.

In essence what it provided was that Rhode Island would make a session of exclusive jurisdiction in United States over lands purchased by the United States from the municipalities or private landowners with the consent given by the Government.

Mr. Justice Stewart in this case, then as one of this alternative grounds held that the attempt by Rhode Island to condition that session, jurisdiction to make a reservation of that session was invalid because the consent to a purchase brought the land involved within Article I, Section 8, Clause 17 of the Constitution which was he felt exclusory of state law and therefore this attempted reservation of jurisdiction was invalid.

This case was reviewed by this Court in James versus Dravo Contracting Company in 302 of United States and there the Court expressly disapproved this holding by Mr. Justice (Inaudible) sitting on Circuit that Clause 17 was exclusory to the extent that it would prohibit a state from making a condition to a session of jurisdiction.

Now our point here is that if Clause 17 is construed by this Court was not exclusory so as to prevent a state from conditioning its consent then it is not exclusory at all except as implemented by Congress.

Now, turning then to the procurement argument and particularly the question which Mr. Justice Goldberg --

Unknown Speaker: (Inaudible)

Mr. John Fourt: Yes, sir?

Justice Arthur J. Goldberg: Are you asking (Inaudible)?

Mr. John Fourt: Yes.

Justice Arthur J. Goldberg: Isn't that issue (Inaudible)?

Mr. John Fourt: Yes, yes.

With respect to that point, it is our position that the 1940 Amendment to revise statutes Section 355 which is requires the notice requirement which the United States must give to a state.

First required a notice and if a notice given here by United States was no notice at all because it said, “We accept jurisdictional where all lands owned by United States within California, give no notice at all to California what parcels were involved.”

Secondly, that as construed by the Department of Justice in its brief to this Court in Adams versus United States that the language in revised Section 355, incorporated such applicable notice requirements of the state.

And they actually mentioned that if a state has a requirement for the filing of a plats and meets in bounds then the United States should comply with that recording requirement.

Therefore, (Inaudible) Congress has given that direction.

We feel that in this case United States did not comply with the statutory direction.

Secondly, the implementation by Congress of this power of exclusive legislation has not clearly superseded state law and one implementation of course is the procurement statutes.

There are other regulations for example that a state warrant of arrest shall not be honored on a federal military installation except in the discretion of the Commanding Officer and there are a number of such regulations.

Again, Congress has not come on forth and clearly said that our procurement statutes are invalid as applied to contractors with the Government.

Now in response to your question, the Mr. Solicitor General said that the crux was whether the state can circumscribe to any extent the way which the Government can contract.

Now, we take it here that what the United States is saying that, it is no concern of the governments whether the contractor with United States received so little on his Government contract that he is unable to pay his dairy farmers for his milk, his labor cost in a highly organized industry.

Indeed, the Court has before it a brief of Petaluma Cooperative, a small cooperative in Northern California were on pages 4 and 6.

It describes how it was driven from the market by virtue of this acute competition.

Now, what caused this competition?

Well, the Government is the largest purchaser of milk in California.

And secondly, its contracts are tremendously powerful leverage in the hands of the Government.

For example, the contract at Travis was for the amount of $500,000 worth of milk and that at Travis was for $450,000 worth of milk.

Perhaps distributor was laughing but he said he'd burn his grandmother alive for that kind of money.

Now, inevitably this law situation which the Government in driving a hard bargain will drive upon contracts with the Government will undermine the efforts of the State of California and other states to correct the very situation, the very economic instability which the Government seeks to take advantage of.

In summary then, we feel that California has been rather sharply dealt with here.

We have questions of statutory constructions of state law which were precluded from deciding under state courts.

We feel that the action of the Government here prevents us from protecting our supply of a vital food which is also vital to the Government.